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The Determinants of U. S. State Economic Growth: A Less Extreme Bounds Analysis

Abstract

This study investigates U.S. state economic growth from 1970-1999. I innovate on previous studies by developing a new approach for addressing "model uncertainty" issues associated with estimating growth equations. My approach borrows from the "extreme bounds analysis" (EBA) approach of Leamer (1985), while also addressing concerns raised by Granger and Uhlig (1990), Salai-Martin (1997) and others that not all specifications are equally likely to be true. I then apply this approach to identify "robust" determinants of state economic growth. My analysis confirms the importance of productivity characteristics of the labor force and industrial composition of a state's economy. I also find that policy variables such as (i) size and structure of government and (ii) taxation are "robust" and economically important determinants of state economic growth.

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File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/0605.pdf
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Paper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 06/05.

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Length: 51 pages
Date of creation: 02 Feb 2006
Date of revision:
Handle: RePEc:cbt:econwp:06/05
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Keywords: Growth; U. S. State Economic Growth; State Fiscal Policy; Economic Development; Taxes; Model Selection; SIC; AIC; AICc; Extreme Bounds Analysis;

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Find related papers by JEL classification:
  • H10 - Public Economics - - Structure and Scope of Government - - - General
  • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
  • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
  • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
  • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
  • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
  • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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Cited by:

  1. Goldberg, Andrew & Romalis, John, 2015. "Public Debt and Growth in U.S. States," Working Papers 2015-10, University of Sydney, School of Economics.
  2. Norman Gemmell & Richard Kneller & Ismael Sanz, 2011. "The Timing and Persistence of Fiscal Policy Impacts on Growth: Evidence from OECD Countries," Economic Journal, Royal Economic Society, vol. 121(550), pages F33-F58, February.
  3. Timothy R. Wojan & Jason P. Brown & Dayton M. Lambert, 2014. "What to Do about the "Cult of Statistical Significance"? A Renewable Fuel Application using the Neyman-Pearson Protocol," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 36(4), pages 674-695.
  4. Leroi RAPUTSOANE, 2016. "Financial Stress Indicator Variables and Monetary Policy in South Africa," Journal of Economics Bibliography, KSP Journals, vol. 3(2), pages 203-214, June.
  5. Benos, Nikos & Karagiannis, Stelios & Karkalakos, Sotiris, 2015. "Proximity and growth spillovers in European regions: The role of geographical, economic and technological linkages," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 124-139.
  6. James Alm & Janet Rogers, 2011. "Do State Fiscal Policies Affect State Economic Growth?," Public Finance Review, SAGE Publishing, vol. 39(4), pages 483-526, July.
  7. Norman Baldwin & Stephen Borrelli, 2008. "Education and economic growth in the United States: cross-national applications for an intra-national path analysis," Policy Sciences, Springer, vol. 41(3), pages 183-204, September.
  8. Rok Spruk & Aleskandar Kešeljević, 2016. "Institutional Origins of Subjective Well-Being: Estimating the Effects of Economic Freedom on National Happiness," Journal of Happiness Studies, Springer, vol. 17(2), pages 659-712, April.
  9. Nivedita Mukherji & Jonathan Silberman, 2011. "Idea generation: the performance of U.S. States 1997–2007," The Journal of Technology Transfer, Springer, vol. 36(4), pages 417-447, August.

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